As AssetMark files for IPO, experts value TAMP at more than $1.2 billion

Turnkey asset management platform says it's seeking to raise $100 million in an initial public offering

Jun 26, 2019 @ 3:00 pm

By Jeff Benjamin

AssetMark could be the next financial services firm to jump into the public equity markets, according to its filing with the Securities and Exchange Commission earlier this week.

The Concord, Calif.-based turnkey asset management platform, which has approximately $50 billion under management, is seeking to raise $100 million in an initial public offering. But experts say the offering will likely be much higher.

Kathleen Smith, principal at Renaissance Capital and manager of the Renaissance IPO ETF (IPO), estimates the company's value at between $1.2 billion and $1.5 billion, based on the profitability indicator of earnings before interest, taxes, depreciation and amortization.

At those valuation levels, Ms. Smith expects the 23-year-old TAMP to try and sell about $500 million worth of stock in the public markets.

"This company will be viewed well because of its growth and high profitability," she said. "A lot of these kinds of asset management companies have good profit margins."

AssetMark is 98.6% owned by Huatai Securities, a Chinese company that paid $770 million for the TAMP in 2016.

Josef Schuster, manager of the First Trust IPO ETF (FPX), said AssetMark has been a profitable investment for several different investors over the years, including a stint as part of Genworth Financial, which took the company private a dozen years ago after AssetMark's original IPO.

"The current owners probably believe they can double their money with the IPO," Mr. Schuster said. "AssetMark is an interesting company. It's in the sweet spot of the independent financial advisory space, and it's growing."

AssetMark did not respond to a request for comment, but according to the SEC filing, it had $37 million in net income last year and it has added nearly $6 billion in assets in each of the past two years.

The TAMP's total assets are up 56% since Huatai bought company in 2016.

Dan Seivert, chief executive at the investment bank Echelon Partners, agreed that the timing of the IPO is likely related to the current owners wanting to "take some money off the table."

"AssetMark has had four sets of owners over the past 20 years, and each set of investors has taken money off the table and some have been able to roll forward their equity in the business," he said. "I think this is a good opportunity to go public while the IPO window is still open."

The strength of the IPO market this year is illustrated by the 33.5% gain posted by the Renaissance IPO ETF, which compares to a 17.5% gain by the S&P 500 Index over the same period.

There have been just six financial-sector IPOs this year, and the combined average return of 9% has been driven largely the performance of Tradeweb Markets, an electronic trading platform that has seen its share price gain more than 50% since its April 3 stock offering.

The best-performing IPO segment this year has been technology, which has seen an average gain of 33% among the 20 companies that went public.

While AssetMark is more closely tied to asset management than financial planning, the financial planning category is still smarting from last year's IPO by Focus Financial Partners (FOCS). Focus raised $535 million in its July 2018 public offering but has since seen its share price fall 18% below the $33 offering price.

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